Impairment long lived assets IAS 36 vs ASC 360
Standards Reference
US GAAP1 |
IFRS2 |
Note
The following discussion captures a number of the more significant GAAP differences under both the impairment standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.
The significant differences between U.S. GAAP and IFRS related to accounting for the impairment of goodwill, indefinite-lived intangible assets and long-lived assets to be held and used are summarized in the following tables.
Goodwill Impairment of assets IAS 36 vs ASC 360
Goodwill allocation
US GAAP |
IFRS |
Goodwill is allocated to a reporting unit. Depending on the facts and circumstances, a reporting unit is either an operating segment or one level below an operating segment (which is also referred to as a component). |
Goodwill is allocated to a CGU. A CGU is the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other assets or groups of assets. A CGU cannot be larger than an operating segment. |
Recognition of impairment loss
US GAAP |
IFRS |
Entities compare the fair value of a reporting unit with the carrying amount. If the fair value is greater than the carrying amount, there is no impairment. If the fair value is less than the carrying amount, the entity will record an impairment charge equal to the difference (not to exceed the carrying amount of goodwill). This also applies to reporting units with zero or negative carrying amounts, which will always pass this test as the fair value of a reporting unit cannot be lower than zero. |
A one-step approach compares the carrying amount of a CGU (including goodwill) to its recoverable amount. When the carrying amount of a CGU is greater than its recoverable amount, an impairment loss is recognized. The recoverable amount is the greater of: (a) the fair value less costs to sell and (b) the value in use (i.e., the present value of future cash flows expected to be derived from the CGU). Any impairment loss is treated as a reduction of the goodwill balance, until that balance is reduced to zero. Any additional impairment loss generally is allocated pro-rata to each asset in the CGU. |
Measurement of impairment loss
US GAAP |
IFRS |
The impairment loss is the amount by which the reporting unit’s carrying amount exceeds its fair value, limited to the carrying amount of goodwill allocated to the reporting unit (i.e., an impairment loss should not result in negative goodwill). |
The impairment loss is the amount by which the carrying amount of the CGU (including goodwill) exceeds its recoverable amount. That loss is then allocated first to goodwill, until goodwill is reduced to zero. The carrying amounts of other assets in the CGU are then reduced, on a pro-rata basis (subject to certain exceptions). |
Reversal of impairment loss
US GAAP |
IFRS |
Prohibited |
Prohibited |
Impairment of indefinite-lived intangible assets
Unit of account
US GAAP |
IFRS |
In general, the unit of account is an individual asset. However, in rare cases, the unit of account may be a combined group of separately recorded indefinite- lived intangible assets that are essentially inseparable from one another. |
When possible, the impairment test should be carried out at the individual asset level. If the test cannot be performed at the individual asset level, it should be performed at the CGU level. |
Recognition and measurement of impairment loss
US GAAP |
IFRS |
An impairment loss is recognized for the amount by which the carrying amount of the intangible asset exceeds its fair value. An entity has the option to first assess qualitative factors to determine whether it is necessary to estimate the fair value of an indefinite-lived intangible asset. An entity electing this option only has to estimate the fair value of an indefinite-lived intangible asset if its qualitative assessment indicates it is more likely than not that the asset is impaired. If the estimate of fair value is needed, the fair value is determined and then compared to the carrying amount. |
An impairment loss is recognized for the amount by which the carrying value of the intangible asset exceeds its recoverable amount. The recoverable amount is the greater of: (a) the fair value less costs to sell and (b) the value in use (i.e., the present value of future cash flows expected to be derived from the asset[s]). The option to assess qualitative factors to determine if further impairment testing is required does not exist in IFRS. |
Reversal of impairment loss
US GAAP |
IFRS |
Prohibited. |
For indefinite-lived intangible assets on which an impairment loss has been recognized in the past, an entity must perform an annual review for indicators of reversal. If such an indicator exists, the entity estimates the recoverable amount of the asset(s) in question and previously recognized impairment losses are reversed in an amount that increases the carrying amount of the asset(s) up to the new recoverable amount, subject to a ceiling of the amount necessary to restore the carrying amount of the asset(s) to its initial carrying amount. |
Impairment of long-lived assets to be held and used
Unit of account
US GAAP |
IFRS |
The unit of account is an asset group, which is defined in the Master Glossary of the ASC as “the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.” An asset group almost always includes multiple assets. In other words, an asset group is rarely a single asset. |
When possible, the impairment test should be carried out at the individual asset level. If the test cannot be performed at the individual asset level, it should be performed at the CGU level. |
Recognition of impairment loss
US GAAP |
IFRS |
An impairment loss is recognized when the carrying amount of an asset group is not recoverable (that is, the carrying amount is greater than the undiscounted cash flows expected to be derived from the asset group) and the carrying amount of the asset group exceeds its fair value. |
An impairment loss is recognized when the carrying amount is greater than the recoverable amount. The recoverable amount is the greater of: (a) the fair value less costs to sell and (b) the value in use (i.e., the present value of future cash flows expected to be derived from the asset[s]). |
Measurement of impairment loss
US GAAP |
IFRS |
The impairment loss is the excess of the carrying amount of an asset group over its fair value. |
The impairment loss is the excess of the carrying amount of the asset over its recoverable amount. |
Reversal of impairment loss
US GAAP |
IFRS |
Prohibited. |
For long-lived assets to be held and used on which an impairment loss has been recognized in the past, an entity must perform an annual review for indicators of reversal. If such an indicator exists, the entity estimates the recoverable amount of the asset(s) in question and previously recognized impairment losses are reversed in an amount that increases the carrying amount of the asset(s) up to the new recoverable amount, subject to a ceiling of the amount necessary to restore the carrying amount of the asset(s) to what its initial carrying amount would have been if the prior impairment loss(es) had not been recognized (that is, what the carrying amount would have been after adjusting for regular depreciation expense that would have been recognized). |
Impairment long lived assets IAS 36 vs ASC 360
Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360
Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360
Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360
Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360
Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360 Impairment long lived assets IAS 36 vs ASC 360
IFRS vs US GAAP impairment long lived assets
IFRS vs US GAAP impairment long lived assets IFRS vs US GAAP impairment long lived assets
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